Topic: PPP Reference Guide
Budget deficits, as conventionally measured, suffer from many measurement and methodological problems. Researchers who have used these conventional deficits to explain currency crises, therefore, unsurprisingly, have found little evidence of any systematic link between the two.
This paper provide an alternative definition of budget deficit and show that there is a close association between the number of currency crises and our measure of deficit.
Kharas, Homi, and Deepak Mishra. 2001. Fiscal Policy, Hidden Deficits, and Currency Crises. In World Bank Economists’ Forum: Volume 1, edited by Shantayanan Devarajan, F. Halsey Rogers, and Lyn Squire, 31-48. Washington, DC: World Bank. [#4558]
Updated: June 27, 2022